Tech Industry

Apple's not sweating the 'scandal'

CNET News.com's Charles Cooper explains why new allegations by Apple's former CFO are falling on deaf ears inside the boardroom.

My first and last encounter with Fred Anderson occurred in 1996, when he lied to my face. Actually, it was over the phone, but you get the point.

I was working as a reporter for PC Week, and it was a late Friday in March when Dan Farber, the publication's editor in chief (who is now also at CNET Networks), walked into my office with a hot tip: Fred Anderson was about to become the next chief financial officer at Apple.

Who the heck was Fred Anderson? Farber shrugged and said all he knew was that the guy worked as CFO at Automatic Data Processing. Long story made short, I tracked Anderson down and asked him point-blank whether the rumor was true. Would he be leaving for Apple?

"Nothing to it," Anderson said, denying the rumor.

A press release announcing Anderson's appointment at Apple rolled off the business wire the following week.

Anderson is still fuming about his forced resignation from Apple's board.

This wasn't the first time in recorded history a muckety-muck stonewalled a reporter. But I figured that Anderson was simply looking out for No. 1, and why risk spoiling his chances for a plum job by blabbing to the Fourth Estate?

I recalled my brief conversation with Anderson this week after he broke his vow of corporate omerta and went public about the most controversial chapter of his decade-long association with Apple as CFO and a member of the board of directors. Through his lawyer, Anderson announced that he had informed Steve Jobs about the accounting implications of an options-backdating move at Apple in January 2001.

That made for quite a headline--not least because it came from the pen of a former insider. Over the years, Apple has perfected the management of its public image. When it comes to presenting its story to the outside world, this is a team that rarely slips up.

But Anderson's a free agent and beyond the reach of Apple's enforcers. And now he's rekindled a controversy that Apple had done its best to explain away.

Apple had assigned a January 17, 2001, grant date to stock options that weren't formally approved until a month later. Last December, the company had to restate its earnings to fix this particular issue. Embarrassing, but nothing worse than what dozens of other technology companies did around the same time.

Fred Anderson Fred Anderson

All along, Apple maintained that Jobs was not aware of any accounting issue. But Anderson says he told Jobs that selecting option grant dates other than the actual date approved by the board of directors could force Apple to record an expense.

Apple's board predictably responded by reaffirming its "complete confidence in the conclusions of Apple's independent investigation, and in (Jobs') integrity and his ability to lead Apple."

That's where the matter remains. I'm sure regulators would love to hear more from the company's ex-chief legal counsel, Nancy Heinen, who is defending herself against fraud charges filed by the U.S. Securities and Exchange Commission. In the meantime, Anderson, who paid $3.5 million to settle with the SEC, is free to rat out his old boss if he wants to.

Will he? If Anderson wants to rekindle our long-standing relationship, he's got an open invitation to call me any time to fill in the blanks. Until then, we're left to speculate on motivation.

Anderson is still fuming about his forced resignation from Apple's board. Following the conclusion of an internal investigation into the options backdating mess, he was served up as the sacrificial lamb. Clearly, that's not the way he wanted to end his career at Apple.

So it was that Roger McNamee, a colleague of Anderson at Elevation Partners, offered this tidbit to The New York Times: "Fred's reputation was impugned by Apple," he said. "All he is doing now is responding--with facts. And he is doing so in the most diplomatic way possible."

Sounds more like gunboat diplomacy to me. This could turn into one heckuva donnybrook. You've got nearly all the ingredients: a possible cover-up, recrimination, money and corporate intrigue. All that's missing is a sordid tale of boardroom sex.

But don't let imaginations run too wild. Apple's board is not about to willingly part with its meal ticket. Say what you like about the man, but Jobs is a splendid CEO.

Apple reported financial results far ahead of Wall Street's expectations in its most recent quarter as profits soared 88 percent on a 21 percent sales climb. That was enough to propel the stock price past the $100 mark.

Those are the kinds of numbers that buy lifetime job security. The old-timers at the company remember the prolonged time of troubles (pre-Jobs) endured under a succession of increasingly feckless CEOs. Suffice it to say that Jobs would need to get caught on video robbing every gold brick in Fort Knox in broad daylight before this board would lift a finger.

Anderson's story is still only hearsay. Jobs remains untouched by the investigation into the stock option-backdating scandal. What's got Apple on edge is the understanding that that could easily change.

If the federal government decides to start taking depositions, then the ignorance-is-bliss defense won't hold up. And then we may learn that all these striving, corporate alpha execs just have faulty memories--or that somebody really is a fibber.